Crude supply down more than expected; natural-gas prices rise

SAN FRANCISCO (MarketWatch) — Crude-oil futures made a late-day reversal Wednesday to finish with a slight gain for the session, their fourth in a row, as traders assessed the latest U.S. government report on petroleum inventories.

The weekly report showed a bigger-than-expected decline in crude inventories but also showed a draw in gasoline stockpiles that was less than forecast.

Crude oil for September delivery
CLU3, +0.00%
tacked on 2 cents by the close to settle at $106.85 a barrel on the New York Mercantile Exchange.

It traded at around $106.37 before the supply data, pared losses immediately after them, fell back below $105, then recovered. Prices, which saw a 72-cent advanceon Tuesday, have now climbed a total of more than 3% since Thursday’s close.

Oil saw some price volatility, with selling Wednesday morning fueled, in part, by U.S. government data showing a 1.5% decline in refinery utilization and falling weekly demand for petroleum products, said Alan Herbst, a principal at Utilis Advisory Group.

But crude prices rebounded “on the belief the markets were oversold,” he said.

Gasoline supplies fell by 1.2 million barrels, while distillate stockpiles, which include heating oil, rose 2 million barrels, the EIA said. Gasoline stockpiles were expected to fall by 2 million barrels, while forecasts called for an increase of 1 million barrels for distillates.

On Nymex, September gasoline
US:RBU3
settled 1.4% higher — a gain of 4 cents — to $2.98 a gallon, while September heating oil
US:HOU3
was little changed at $3.05 a gallon.

Although on the surface they are “rather mixed numbers, we think the large draws we saw a month ago are in the rear view mirror,” said Tariq Zahir, managing member at Tyche Capital Advisors. For the week ended July 12, the EIA reported that crude supplies had dropped 6.9 million barrels from the previous week.

The supply data now “is nothing like what we were seeing a month ago when they were ridiculous draws,” Zahir said.

As the market nears the end of the driving season, it “may start to see builds in the coming weeks and months, which will in turn put pressure on spot prices barring and supply disruptions that could arise in the [Atlantic] hurricane season we are in or any new geopolitical headlines that are unforeseen,” he said.

Late Tuesday, the American Petroleum Institute reported that crude stocks fell by 999,000 barrels last week, while gasoline inventories added 1.7 million barrels and distillate stocks rose 1.1 million barrels.

On the ICE Futures exchange, September Brent crude
LCOU3, -0.36%
fell 38 cents, or 0.4%, to $110.20 a barrel, giving back part of its 85-cent gain from Tuesday. The contract expires on Thursday.

“The market is remaining calm in the face of the latest violence in Egypt, possibly reflecting a view that the military will ultimately succeed in restoring order,” said Tim Evans, energy analyst at Citi Futures, in a note.

Meanwhile, September natural gas
US:NGU13
saw some sizable gains, up nearly 6 cents, or 1.7%, at $3.34 per million British thermal units.

In a report issued Wednesday, AccuWeather.com forecast that the threat of tropical-storm development could linger late in the season.

The typical season lasts from June 1 through Nov. 30. Tropical storms in the Atlantic are a concern for the energy market, as some may turn into hurricanes that impact oil and natural-gas production and transport in the Gulf of Mexico.

The EIA will issue its weekly data on natural-gas supplies Thursday. Analysts polled by Platts expect to see an increase of between 68 billion cubic feet and 72 billion cubic feet.

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